In the recent case Talarico v. Olivarri, a court held that in addition to specific performance, it is proper for a court to award damages for the extra expenses incurred and tax advantages lost by a purchaser as a result of a seller’s delay in closing a real estate contract.
Robert Talarico and Michael Martin (“Sellers”) owned and operated a bakery in Chicago, Illinois. Rudolph and Luz Olivarri (“Purchasers”) entered into an agreement to purchase the building in which the bakery was located from the Sellers for $118,000. The closing was originally scheduled for July 29, 2000, but was continued to August 27, 2000. Sellers, however, failed to convey the property to Purchasers on August 27, 2000.
Purchasers subsequently filed suit against Sellers for breach of contract and to direct Sellers to specifically perform the terms of the contract and convey the property. In addition, Purchasers sought damages for rents and related expenses incurred and for the loss of certain tax benefits caused by the delay.
On December 27, 2001, the court entered an order requiring Sellers to specifically perform the terms of the contract and convey the property to Purchasers. The parties subsequently closed the sale of the property on February 15, 2002.
The court held that despite the fact that the breach of contract had been cured as of date of the closing, the Purchasers were entitled to damages for the delay between August 27, 2000, the date when the transaction was originally scheduled to close, and February 15, 2002, when the sale actually closed, since such damages were not inconsistent with the cure of the breach.
The court further noted that the additional damages Purchasers sought for the rent expenses and associated costs incurred and the loss of tax advantages suffered as a result of the delay were reasonably foreseeable by the Sellers. The court stated damages are recoverable for losses the breaching party had reason to foresee as a probable result of the breach when the contract was made. Since it was reasonably foreseeable that the Sellers’ breach would cause Purchasers to rent other commercial property to operate their business and to suffer adverse tax consequences, the court ordered the Sellers to pay to Purchasers such additional damages.
This case demonstrates that sellers in a real estate transaction who delay in conveying the property may not only be ordered by a court to convey the property, but also may be responsible for any reasonably foreseeable expenses caused by the failure to convey the property at the time specified in the sale agreement.